India Election: What Narendra Modi’s Victory Means for the U.S. Economy

Narendra Modi’s victory in the Indian election is expected to improve trade ties between New Delhi and Washington and could eventually lift U.S. exports in industries ranging from pharmaceutical products to heavy infrastructure, U.S. officials and business leaders say.

Narendra Modi addresses a public rally Friday after his party won its biggest victory in 30 years on promises to revitalize the economy.

Agence France-Presse/Getty Images

But the prospects for greater economic ties, which suffered in recent years under India’s ruling Indian National Congress, depend at least partly on relaxing U.S. diplomatic tensions with Mr. Modi. The Hindu nationalist politician has been blamed for mass violence against Muslims while he was governor of Gujarat, an issue that has made him ineligible for travel to the U.S. and prevented high-level contact with the U.S. State Department until earlier this year. Mr. Modi has said his government did its best to stop the violence against Muslims in 2002.

On Friday Mr. Modi, whose pro-business credentials during Gujarat’s rapid economic expansion have already lifted India’s stock market, led his Bharatiya Janata Party toward an apparent victory that could make him prime minister later this month.

Depending on which officials join his government, U.S. companies could benefit from a relaxing of recent policies that promoted Indian manufacturing and intellectual property at the expense of international rivals, U.S. business groups say.

“Looking at his reputation and track record in Gujarat, there were some good signs from his tenure there,” said Linda Dempsey, vice president of international economic affairs at the Washington-based National Association of Manufacturers, a trade group.

Below are some U.S. sectors that could see benefits or challenges under Mr. Modi’s government:

War for Drugs

U.S. lawmakers and drug companies have blamed New Delhi for using its intellectual property laws to build up India’s domestic drug industry at the expense of international competitors. The country’s patent office in 2012 ordered Germany’s Bayer AG to issue a license allowing an Indian generics company to copy Bayer’s patented cancer drug Nexavar—and market it at 1/30th the cost.
“This is a sore issue in the relationship, and one would only hope that steps would be taken to improve protection for intellectual property,” said Myron Brilliant, executive vice president at the U.S. Chamber of Commerce, the largest business lobbying group.

Hollywood vs. Bollywood

The U.S. Trade Representativehas put India on a list of countries with low intellectual property standards, but senior Washington officials say they’re optimistic about working with the new government on counterfeit movies and other issues. A U.S. official last month told reporters that better ties under a new government could help Hollywood better cooperate with India’s Bollywood, since “pirates don’t discriminate amongst the two types of movies.”

Solar Flare-Up

The U.S. has twice taken a solar power dispute with India to the World Trade Organization, complaining that a major Indian government program to expand its solar-generation capacity discriminates against American suppliers. The U.S. solar industry estimates India’s rules put $200 million to $300 million in U.S. exports at risk.

Indian officials respond that Washington has also supported protectionist policies and that U.S. officials make unreasonable demands on India’s economy.

A new government would likely move more quickly than the current one to address discriminatory rules that require some electronics and other products to be produced locally in India, business groups said.

Going On Defense

U.S. defense contractors and aircraft manufacturers made out OK under the current Indian administration, and they may not have it any better under Mr. Modi’s watch. “Some of the industries in the U.S., particularly defense and aerospace, didn’t see any particular difficulty making sales in India, not that it was easy,” Ms. Dempsey said.

Defense-related cooperation requires a combination of bureaucratic maneuvering on both sides. U.S. firms are slowly building inroads in New Delhi, which for decades was a reliable customer of the Soviet Union and Russia on everything from warplanes to nuclear energy. Depending on how the new government is formed, top U.S. defense exporters might have to rebuild some delicate relationships.

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